If a $5,000 face-value discount bond maturing in one year is selling for $5,000,then its yield to maturity is
A)0 percent.
B)5 percent.
C)10 percent.
D)20 percent.

Question

Quizplus · Accepted Answer

If a bond is selling for its face value or par value, then the yield to maturity is equal to the coupon rate. A discount bond with a face value of $5,000 selling for $5,000 has a coupon rate of 0%, which means that the yield to maturity is also 0%. Therefore, the correct choice is (A) 0 percent.

If a $5,000 Face-Value Discount Bond Maturing in One Year